Jud Gostin says if he could do it again, he'd get another CEO

Mike Greenlar / The Post-StandardSensis founder and former CEO Jud Gostin at left talks to Nasir Ali of Seed Capitol Fund of CNY at an Upstate Venture Association of New York meeting at the Crowne Plaza Hotel in Syracuse. Gostin built Sensis into a major CNY company.

Syracuse, NY -- If he had to do it over again, the man who created Sensis and ran it for a quarter century before selling it last year, would have removed himself from the job of CEO.

The challenges of running a company are different from starting one, Jud Gostin told a gathering of the Upstate Venture Association of New York on Tuesday evening.

Gostin told how he started Sensis in the mid-1980s after a career at General Electric that he described as 24 great years and three very unpleasant ones.

With a commitment from one customer he was able to attract four excellent people from GE in Syracuse. Unfortunately the one customer was GE space division in Utica and, Gostin said, after a phone call from the boss at GE Syracuse to Utica the order came in at far less than expected.

With contacts in the defense department, Gostin said Sensis was able to secure other contracts and keep going. Sensis had a stock sale, selling $400,000 worth of stock at 25 cents a share.

Most of the buyers were secretaries and co-workers who invested $5,000 each, Gostin said. Others failed to see the promise in the company, including two bank presidents and the head of a Metropolitan Development Association. Gostin told of making a presentation about his company to the trio which concluded with them deciding, “$5,000 was too much to invest.”

A few months later, after Sensis had landed a significant contract, one of the three called to say they had experienced a change of heart. “I was delighted to say there was no more stock available,” Gostin told more than 60 entrepreneurs and advisors who filled a function room at the Crowne Plaza.

The company enjoyed years of growth, expanding to 700 employees, something that gave Gostin great joy. “I loved looking out at the parking lot at all the cars,” he said. The company’s reputation was strong and sales were growing.

Gostin said he was focused on significant future growth. That was a problem, he said.

When the world economy slowed, the company was saddled with debt it had borrowed planning for growth. It moved to reduce overhead, laying off 83 workers – “good people,” Gostin said – in the middle of 2008.

But that wasn’t fast enough. The company lost money for six straight quarters.

“I responded too slowly to the market downturn,” Gostin said. Had he laid off twice as many workers six months earlier, he may not have needed to sell the company, he said.

If the company had stored up more money when sales were strong, things could have been different. “Had our return on sales been only 1 percent high we could have had enough cash,” Gostin said. “I should have done a better job of establishing higher expectations.”

Asked by someone in the audience if the people who had bought stock in the company would have put up with him stepping aside as CEO, Gostin said knowing what he knows now, he would do it anyway. “It’s a painful thing, but it’s for the good of the company.”

Gostin sold the company to Swedish defense firm Saab AB in mid-August. He resigned days later. Saab paid $155 million in cash for Sensis, with the potential to pay another $40 million to the current owners by 2014 if profit and marketing benchmarks are met.

In October, Saab Sensis eliminated 72 position, reducing total employee count to about 500. The move, company officials said, was necessary to create "a stable and profitable platform that we can build upon."

For those secretaries and others who bought shares of Sensis for a quarter, the return has been about 40 to one, for an annual return of 12 percent to 15 percent, Gostin said. “It was OK."

Gostin said he’s now looking to help local high-tech start ups. “The ideas and underlying technologies are quite good but plans and management are not good,” he said.